Market Sentiment Soars as Canada Shifts Trade Strategy

Canada U-Turn Boosts Risk Appetite in Asia

The current Asian market session has seen a positive shift in sentiment, primarily driven by Canada's recent actions. By abolishing the digital tax on American companies and expressing willingness to revive trade discussions, Canada has ignited a risk-on mentality across the global markets. Notably, futures for major US indices such as the S&P 500 and the Nasdaq 100 showed gains of 0.4% and 0.5%, respectively, indicating rising investor enthusiasm.

Asian equities also reflected this optimism, with Japan’s Nikkei 225 experiencing a notable increase of 0.9%. This marks a continuation of its upward trajectory, achieving its fifth consecutive day of gains following a significant breakout last week.

Meanwhile, the Hang Seng Index in Hong Kong adjusted from earlier losses, moving from a decline of 0.8% to just 0.25%. This adjustment can be attributed to a less severe contraction in China's NBS Manufacturing PMI for June, which registered at 49.7, slightly better than the previous month’s 49.5. Additionally, there was a modest increase in the Services PMI, which rose to 50.5 from 50.3, adding to the positive market sentiment. The Hang Seng TECH Index also saw a minor uptick, rising by 0.1%.

US Dollar Weakens Further; Yen Outperforms

In the foreign exchange markets, the US dollar continued to lose ground during the Asia session after the US Dollar Index fell below crucial long-term support at 97.40. The index dipped an additional 0.2%, now standing at 97.04, raising concerns about a possible sustained bearish trend in the dollar.

Conversely, the Japanese yen emerged as a strong performer among major currencies, gaining 0.6% against the dollar. The USD/JPY pair is currently trading at 143.90, testing significant support levels aligned with previous upward trends.

In the United States, equity markets are finishing strong, despite persistent fears surrounding stagflation. Notable economic indicators include a rise in Core PCE inflation for May to 2.7%, surpassing April’s figure of 2.6%. Contrarily, personal spending saw its first monthly decline since January, falling by 0.1%. These figures reflect ongoing challenges presented by tariffs and economic uncertainties that are impacting consumer behavior.

The S&P 500 and Nasdaq 100 indices both achieved fresh all-time highs, closing up by 0.5% and 0.4%, respectively. This performance persisted despite President Trump's assertive trade comments, indicating his intention to pause negotiations with Canada due to proposed tariffs stemming from Canada's digital services tax.

Gold Eyes Rebound After 6% Corrective Pullback

Gold also appears to be on a recovery path after experiencing a significant 6% pullback over the past two weeks. Currently, the yellow metal is testing crucial support levels at approximately $3,250. In response to deeply oversold conditions, gold has shown signs of rebound, with intraday prices moving up by 0.4% to around $3,287.

Economic Data Releases

As we approach key economic data releases, market participants are keen to observe how these indicators will influence trading strategies and market dynamics. A steady stream of economic insights will be crucial in shaping investor sentiment moving forward.

Chart of the Day – Bullish Momentum Intact, Germany 30 Is Eying a Fresh All-Time High

The Germany 30 CFD Index, serving as a barometer for the German economic landscape, has maintained a bullish trajectory following a retest of its 50-day moving average earlier this week. This bullish reversal reflects a series of aggressive upward price movements, suggesting that the index is poised for a potential new all-time high.

Market watchers should keep an eye on the short-term pivotal support at 23,770, coinciding with the 20-day moving average. Anticipated resistance levels lie ahead at 24,260 and 24,560/24,600, as indicated by Fibonacci extensions.

A failure to hold above the support level of 23,770 may reverse this bullish sentiment, triggering a minor corrective decline that could expose lower support levels at 23,510/23,440.

Frequently Asked Questions

What recent change influenced Asian market sentiment?

Canada's decision to abolish its digital tax on US firms and resume trade talks significantly boosted market risk appetite.

How did the US dollar perform during the Asian session?

The US dollar weakened further, dropping below major support levels and indicating a potential bearish trend.

What economic indicators affected US markets recently?

Core PCE inflation rose to 2.7%, while personal spending decreased by 0.1%, highlighting challenges in consumer demand.

How is gold performing after its recent decline?

Gold is showing signs of recovery after a 6% pullback, rebounding to around $3,287 amidst oversold conditions.

What should investors watch in the Germany 30 CFD Index?

The index is aiming for a new all-time high, with key support and resistance levels being crucial for future movements.

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